SPMS, the Dutch pension fund for medical consultants, has divested its inflation-linked bond (ILB) holdings and reduced its hedge fund allocation in favour of a new position in infrastructure debt.

In its annual report for 2016, Jeroen Steenvoorden, the scheme’s director, explained that the pension fund intended to increase its infrastructure investments to 5% of the overall during the coming years.

He said that the €9.8bn pension fund had opted for investments through two managers and several funds, “because of the complexity of the asset class”. He added that SPMS expected returns of more than 2.5%.

The pension fund reduced its hedge fund allocation – which generated a “disappointing” return of 0.6% last year – from 9% to 6%, Steenvoorden said.

Its ILB portfolio had comprised 3% of the scheme’s assets.

According to the director, SPMS had temporarily re-invested the combined proceeds of the divestment into fixed income and liquid equity, split equally.

Last year, the occupational pension fund returned 12%, including 4.5 percentage points due to the effect of falling interest rates on its 78% interest rate hedge.

Its 55% fixed income portfolio generated an overall result of 10.7% and had benefited from the rates decrease, SPMS said.

It said that returns varied from 9.4% from German and Dutch government bonds to 17% from developed market government paper. Euro-denominated credit gained 4.3%, while US credit returned 10.6%.

The pension fund’s equity holdings (27% of the total portfolio) delivered 10.1%, with European equity losing 0.4%. US and emerging market equity produced 16.8% and 15.8%, respectively.

SPMS said it had replaced its worldwide equity mandates with regional ones. In contrast, it did the reverse with its real estate allocation, switching from two regional mandates to a worldwide mandate.

The pension fund said its 10% stake in real estate had also benefited from the low interest enviroment, returning 7.6%.

SPMS grants its 16,455 participants and pensioners a fixed annual indexation of 3% and also aims to top this up with an inflation-linked compensation linked to the Netherlands’ salary index.

At June-end, the funding of the medical consultant scheme stood at 121.8%.